Handicapping The ETF Issuers: Barclays Still the Team To Beat

Touché Mr. Hougan! Your post puts me at a mind to handicap the ETF issuers. I had not seen that PowerShares TV ad. I find it as hilarious as you do disturbing. For anyone who did not click on the link to the ad in Matt’s last blog, here it is.

You’re saying something I’ve been saying for a long time – and that’s that, contrary to public pronouncements and apparently SEC belief, there have long been active ETFs on the market. The two original PowerShares were maybe the first. Anything that’s trying to outperform its cap-weighted benchmark by 1,000 basis points is, er, active in my mind, whether it works through stock picking or a “quantitatively-driven index.”

OK – now the fun part…handicapping the existing array of product issuers. Good lord – I hope I don’t forget any of them…it seems like a new one pops up every day. I’m sure I’ll hear about it if I do. I’m only doing issuers, not licensors like Adelante and IndexIQ…we could save them for another day.

[Note: This data is as of end of Q1, 2007, so it's already somewhat out of date. To see all of the new listings since, you can refer to ETF Watch.]

Barclays Global Investors (iShares)
Funds: 127
Assets: $260.10 billion
Barclays (BCS) is clearly the team to beat. They’ve set the model in terms of both product development and marketing. Their template is the one that to some degree everyone else is following. It emphasizes a complete and coherent product line, a clear message and a fleet of sales people. Remarkably, they continue to lead the field in product innovation as well (see ETNs) and have not rested on their laurels.

State Street Global Advisors (SPDRs)
Funds: 51
Assets: $103.27 billion
Here’s the real dark horse of the field. Is it possible to be a dark horse and a behemoth at the same time? SSgA still has the largest ETF, but the original follow-up efforts floundered amidst poor branding and sales support. There are clear indications that the ship is being turned around (sorry for the ship allusion, Vanguard) as more resources and commitment are being poured into the ETF effort. Recently, there have been successful launches and a more coherent branding message. SSgA still has all the tools to be at the front of the pack. Time will tell if they step up to it.

The Vanguard Group
Funds: 28
Assets: $26.92 billion
Even though they’ve still got a long way to go on assets, they’ve clearly turned the corner with their ETF expertise. Because of their strong commitment to ETFs, quality indexes and index management, and cost advantage, Vanguard certainly looks like the comer right now. Their flows have certainly demonstrated this…and they’ve done all the right things on the marketing and sales side. The proof, as they say is in the pudding. And right now, they’re swimming in it in Malvern.

PowerShares
Funds: 75
Assets: $27.10 billion
The clear number 4, augmented by their extremely savvy co-opting of the QQQ marketing budget (which, incidentally, appears to me to be turning out best for both parties, and clearly is having more overall impact). QQQ pads the asset total by a cool $16.73 billion. They’ve taken a lot of needling from the industry for their lack of a clear overall message and their “throw it on the wall and see if it sticks” product launch philosophy. But again, their Wheaton offices are awash in pudding at the moment…pudding that was the product of a smart and fast product launching effort that followed on the heels of their initial success. Let’s see how things work with INVESCO. So far it seems clear that they continue to have full autonomy.

ProShares
Funds: 52
Assets: $4.33 billion
Probably, with Vanguard, the biggest success story of the last couple of years. ProShares somehow, after all those years, managed to get out there with the levered ETFs first, and they clearly launched into strong demand, and have not only cut Rydex off at the pass on ETFs, but have also eaten up some of Rydex’s traditional fund base. Let’s see if they are able to keep the momentum with new product innovation.

Rydex
Funds: 25
Assets: $4.50 billion
Rydex’s future is a bit of a question mark with the recent acquisition, and the sense is that, despite not managing to be first to market with the levered ETFs, their product development has lapped their marketing. Rydex has some great exchange-traded products out there. I really don’t think they get enough credit for them. But they have gotten assets, and I guess that should be credit enough. The problems for them are the bleed on their traditional fund side and the lower margin on the ETF side. I think this shop has great potential in terms of branding and products to really step up and become a more major player on the scene though.

WisdomTree
Funds: 36
Assets: $3.07 billion
WisdomTree (WSDT.PK) has taken a lot of flack, but they’ve brought in some billions and have enough cash in place to continue to chip away at the core (enhanced) indexing crowd they are targeting. The book on them is lots of cash and a real flare for PR, together with a very interesting lineup of products. Whether or not they’ve managed to put in the distribution and coherent messaging to a wider retail audience remains to be seen. But they do have the tools and commitment in place to make a run.

Deutsche Bank Commodity Services
Funds: 11
Assets: $1.49 billion
Deutsche Bank (DB) is a very smart operation in a very big organization. This group is somewhat of an orphan at Deutsche, which strikes me as a bit odd given that DB is getting very serious about ETFs in Europe and has even dabbled on the licensing side w/ the CROCI First Trust alliance in the U.S. For the commodities and currency products, all the distribution goes through PowerShares.

Van Eck
Funds: 3
Assets: $670 million
Van Eck is a great little fund company. They’ve had success with everything they’ve done and have been very smart about their launches. With a strong pipeline, look to see them continue to grow into a very strong niche operator.

Claymore
Funds: 11
Assets: $460 million
Claymore has potentially very interesting distribution and an innovative array of products already in place, but they are in a very difficult spot in terms of the types of products they have and the need to differentiate and market them. The question is whether their level of commitment to the space is equal to the task.

First Trust
Funds: 12
Assets: $590 million
First Trust similarly has some interesting products on the market, but may need to step up its level of commitment to the ETF space to become a serious player.

XShares
Funds: 14
Assets: $60 million
XShares has been a repeated topic of conversation and butt of jokes in the industry, I think somewhat unfairly. Some of the ideas behind what they’re doing are extremely interesting, and the plan to serve as a platform for people with ideas is a great plan…if they can pull in some assets. They need a couple big hits to get this thing rolling; then they can work on building the brand and expanding the product range.

Bank of New York
Funds: 1
Assets: $9.15 billion
BNY has become an extremely limited player in the issuer business, though they’ve become a behemoth in ETF servicing. With the BLDRs, which I always thought were interesting, now going to PowerShares, BNY is left only managing MDY.

Merrill Lynch
Funds: 17
Assets: $9.56 billion
Merrill (MER) arguably doesn’t belong here, since the HOLDRs are not really ETFs. But neither are the commodity and note products, and we are including those here. They have a lot of assets and, well, no back end: Try to get someone on the phone to talk to you about HOLDRs. I’ve not heard anything about any more of them coming out.

Ameristock
Funds: 0
Assets: 0
Ameristock is coming out with all the new Ryan indexes…which are certainly an interesting array of products. To be honest, I don’t know much about this operation, but hopefully they’ve got the staffing to take them to beyond where they FITRs went w/ Ron Ryan’s previous indices.

Victoria Bay Asset Management
Funds: 1
Assets: $960 million
Since launching the wildly and immediately successful USO oil ETF, VAM has only managed one launch - a Natural Gas fund - which doesn't even show up on this data since it was launched in Q2. One might think that they would have followed up by launching an aggressive array of individual commodity products. So far, that's not the case.

Ziegler Capital Management
Funds: 1
Assets: de minimus
ZCM has a cool fund with a great history (the NYSE Arca Tech 100 – formerly the Pacific Exchange 100 Index) but not anything else as yet

Index Publications
Funds: 0
Assets: Bananas
Index Publications is a real comer with our forthcoming BoboDex 10 (listed in the latest Morgan Stanley report as a forthcoming product launch – thanks Debbie!) The performance thus far cannot be touched, but Bobo himself is a real wildcard. He could just up and get on a freighter headed to warmer climes. His methodology is in place, though.

Good lord, that was a blog for the ages. I’m glad I got this posted before another five product issuers came to market in the U.S. And we have not even TOUCHED Europe or Asia…